Your Emergency Fund and YouSubmitted by MCF on June 29th, 2017
Summer is finally here. The sun is out, it’s warm, the days are longer, and your worries seem just a little bit further away. But, folks, sometimes storms roll in on the sunniest of days. And if we’re honest, the world is a bit of a scary place at the moment, with politics impacting the economic climate, and warmer temperatures affecting agriculture all around the world, the future is perhaps not as certain as it once was.
So instead of purchasing a bunker and preaching the end is near to your entire social media following, prepare for the uncertainty with an emergency fund. What is an emergency fund? According to Investopedia, an emergency fund can be defined as, “an account used to set aside funds needed in the event of a personal financial dilemma, such as the loss of a job, a debilitating illness or a major expense. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to draw from high interest debt options, such as credit cards or unsecured loans.”
The old saying ‘failing to prepare is preparing to fail’ comes to mind when thinking about the importance of an emergency fund. It’s not necessarily top of mind when payday arrives, however contributing to your emergency fund should feel as urgent as paying off monthly bills.
So how much should you contribute to your emergency fund?
As daunting as it might seem, we generally recommend that you save 3-6 months of living expenses in your emergency fund, depending upon your personal circumstances. If you’re at the beginning of your journey to creating an emergency fund, where should you start? Try to set monthly goals and stick to them. Look to cut back on things that could be considered luxuries, and focus on how you’ll feel when that next emergency happens and you’re covered because you prepared.
Now, it’s critical to remember what an emergency really is. It is not a vacation, a new wardrobe, or even a new boat. It truly needs to be allocated to emergencies. If you’d like assistance in determining the appropriate amount of funds to allocate to your emergency fund, contact an advisor at MCF.
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